Monday, March 28, 2011

Markley, The Fly In The Ointment

Newly elected State Sen. Joe Markley has now officially become a fly in the ointment.

"For a guy who has got a $3.3 billion [deficit] in next year's [budget], $647 [million] in this year's would be a concern, I can assure you. I am well aware of it," said Governor Dannel Malloy of himself while making his rounds of towns on his listening tour.

Mr. Markley’s suit, which is centered on a tax/fee Connecticut has attached to electric bills, is holding up bonding money and, for this reason, the state has asked Connecticut’s Supreme Court to expedite its decision.

State Treasurer Denise Nappier has delayed issuing bonds to cover the deficit in the current fiscal year until the matter before the court is decided. It would be necessary to disclose pending litigation in any official statement sent to potential bond investors, and this is the sort of ash sprinkled on a dessert that would discourage bond buyers from scooping up the delicacies.

Mr. Markley’s suit is somewhat embarrassing because the charge on electric bills, a disguised tax, is somewhat embarrassing to an administration that has promised Connecticut taxpayers that budget sleight of hand would not be tolerated in an honest and transparent government.

Initially, the charge on electric bills was levied as a “fee” that would serve as surety for bonds issued to pay for the cost of energy deregulation. Deregulation has been marginally successful in reducing energy costs, but the effort to deregulate the energy market in Connecticut would pay more impressive dividends to energy users if the state were more serious in eliminating energy regulations – which is what deregulation really means. So far, the state has sought to lower energy prices on the demand side through energy conservation. The quicker and more efficient way to lower energy costs is to increase the energy supply and reduce unnecessary regulations that serve as a bar preventing energy suppliers from peddling their wares in Connecticut.

The “fee” was to elapse after the bond money had refreshed state coffers and the costs associated with deregulation had been discharged. But in the meantime the state had accumulated a massive deficit, and it was decided to extend the so called fee indefinitely. Since the now altered fee was designed expressly as a vehicle to transfer money from electric ratepayer’s pockets into the state treasury, the form of the attachment had become, in Mr. Markley’s estimation, an undisguised tax. His suit questioned the authority of the Department of Public Utility Control to collect a tax, and the same suit claimed the tax was inequitable since some rate payers, depending upon which suppliers they had chosen, never paid the fee assessment and would not be charged a tax.

The energy tax would amount to about $100 a year for the average family, but the tax would run into thousands of dollars for businesses and municipalities, which would be recovered by municipalities in the form of higher taxes and by businesses in the from of higher prices for their products and services.

Mr. Malloy has said the Markley suit, if successful, will punch a hole in this year’s $19.2 billion budget of $647 million, the amount of money the state hopes to realize through its surreptitious tax. It is also possible that the suit, provided it is not speedily settled at the Supreme Court level, will be dragged through the courts much in the way Hector was dragged by Achilles around the doomed wall of Troy, making it more difficult for State Treasurer Denise Nappier to issue bonds that will cover the current fiscal year’s deficit.

Mr. Malloy, who railed against the use of bonds to pay off budget deficits in his successful gubernatorial campaign, has said, “I think the fee was fair. I think it was misguided. It's not a public policy I would have otherwise promoted or supported. If you're asking do I believe it to be legal? The answer is yes.”

Mr. Markley – who believes an honest government should approach its debts honorably through its constitutionally authorized taxing powers – admits that his suit would not permit the state to meet its debts dishonorably through fees designed to dupe the electorate; and he acknowledges that his suit, if successful, will open a hole in the budget. Tough love is always tough.

"I feel about it,” Mr. Markley says, as “I would watching a friend, who had been drinking all evening, go back to the ATM one more time to take more money out of the bank. Yes, you might think this is a good idea right now, but when you wake up in the morning, you're going to wish you hadn't taken out any more money."

Connecticut’s highly politicized State Supreme Court, for ill or good, may decide the question of law presented by Mr. Markley’s suit. It can not, and ought not, to decide the political question embedded in it: How crooked and irresponsible do we want the taxing authority in the state of Connecticut to be? That question can be decided only by an awakened citizenry.